Developers object to raising development charges
The city council postponed its deliberations until its April 8 meeting.
Systems development charges are fees charged to developers to help cover the cost of new infrastructure required to meet the needs of new residents. In the case of transportation, that includes projects such as widening a road to handle more traffic.
The money may not be used for maintenance of existing infrastructure. If the same road also needed repaving, that part of the project would have to be funded independently.
The hearing had three purposes: To discuss new methodology for calculating the charges, to recommend a rate level and to discuss a proposed project list.
The city updated its master transportation plan in 2010. In 2011, an advisory committee created a list of projects from that plan that would be eligible for using SDC money.
Developers had no problem with the list and little problem with the new methodology, which, although a substantial change, reflects an update to meet current national standards. They objected strenuously, however, to the prospect of having to pay more.
“Why are we picking on builders again?” developer Howard Aster asked the council. “I would like to challenge the council to be more creative.
“New homes and home builders are not the only people using the roads … Why don’t you go to the car dealerships and say, we need $50 per car sold, or go to the lawyers and say you need $50 per contract, or the insurance salesmen and say, $50 for each insurance package. ...
“None of those people has taken the beating homebuilders have. I just would like to see you go in a different direction.”
Two other developers, Ray Kulback and County Commissionr Allen Springer, who owns a custom homebuilding company, also urged the council to seek another source of funding.
“It’s just assumed the builders should do this,” Aster told the council. “But why? I reject the idea that this should be the responsibility of the builders and new home buyers.”
The council is planning to put a transportation bond issue on the November ballot. City transportation consultant Andy Mortensen said a few cities also assess utility fees to raise transportation money, but that idea has not generally proven very popular.
“Other than that, it’s selling cookies,” he told the council. “There just aren’t that many ways a jurisdiction can raise money ... and many have been tried.”
Most Oregon cities assess a transportation SDC. McMinnville’s dates back to 1995, according to Community Development Director Mike Bisset.
The full cost of the projects listed in the master transportation plan is $34 million. The projects listed as SDC eligible account for more than $26 million of that. The city has $1.5 million of SDC money in reserve, leaving it with $24.5 million to potentially collect.
However, Mortensen told the council he’s not necessarily recommending that the city charge fees high enough to cover the full cost of the eligible projects.
The council began wrestling with the issue last November. It decided to posptpone its decisionmaking for a few months to await completion of an Economic Opportunities Analysis featuring new population projections.
In the wake of the recession, the EOA committee concluded McMinnville would experience slower growth than earlier projected. That was not good news for developers, because it suggests the city will need to spread a higher SDC fee among fewer projects.
Mortensen calculated that each new vehicle trip, divided among the projected population, would require $3,399 in transportation investment, up from $3,046.
Mortensen told the council there are all sorts of way s to decide how much of that to try to capture from SDCs. For his examples, he chose four: a “basic” option keeping charges for new single family homes unchanged, but hiking rates for commercial projects as a result of the new methodology; a “full recovery” option substantially increasing SDC rates; and two “midpoint” options, one halfway between the base and full recovery, the other a quarter of the way.
The lower of the two midpoint options would mean an increase that was originally calculated at 32 percent, and still listed as such on charts displayed for the council, but would actually be higher in light of the new population projections.
“We should have relabeled the charts,” Bisset acknowleged. However, he said, “The point is that there are a lot of ways to decide how much to recover.”
The base rate would bring in about $10.3 million, Mortensen said. The lower midpoint would bring in about $14.36 million, the higher one about $17.76 million, he said.
Under most scenarios, the city would still be under the state average, even with a move to the so-called “full recovery” rate designed to raise the entire $24.5 million.
At the highest rate increases, the city would still be charging less than the statewide average.
Mortensen created several charts to show how the various options might affect charges for single family homes, apartment buildings, banks, fast-food restaurants, grocery stores and general office buildings. He also showed how those rates would compare to statewide averages.
For a single-family home, the options ranged from the current fee of $1,426 to a high of $3,560. Statewide average is $2,421.
For an apartment building of 100 units, it ranged from the current fee of $95,823, to a high of $186,927. Statewide average is $148,771. Under the new methodology, the new base rate would actually decrease, to $83,326.
The new methodology calculates traffic according to evening peak hours only, which Mortensen said is now believed to give the most accurate picture of the heaviest traffic.
For a bank of about 1,200 square feet, the city currently charges an SDC of $4,434, while the state median is $22,496. The full recovery rate would be $22,064.
For a fast-food restaurant of 6,000 square feet currently the city charges $20,358, compared to a statewide average of $173,696. The new base rate would be $41,542; the full recovery rate, $93,192.
For a grocery store of 120,000 square feet, the city currently charges $128,401, compared to a statewide average of $1.1 million. The new base rate would be $407,239; the full recovery rate, $913,563.
The city charges $21,326 for a 20,000 square foot office, compared to a state average of $56,610. The new base rate would be $40,300; the full recovery rate would be $90,405.
Developers at Tuesday night’s meeting were not appeased by hearing that the city rates would still be lower than the state average.
Kulback told the council he doesn’t see what relevance the comparison with other cities has to McMinnville, although he accepted Mayor Rick Olson’s answer that he likes “to see if we’re in the ballpark.”
Howevever, Kulback said, “What’s wrong with having all taxpayers pay” for new infrastructure.
Springer said he questioned the population projections, was “shocked by the timing” of the proposal, and angry at the idea that, if a levy is passed, developers would pay taxes, as well as the SDC fees. He also argued that other cities’ fees have little relevance to McMinnville, because different locations recover differently from recessions.
City councilor Alan Ruden, himself a developer, spoke out numerous times against the proposal, in responding to comments made in testimony.
However, the council eventually decided to hold off on its deliberations until April 8, given the lateness of the hour.